Everyone is now waiting for "the taper" to attack.
This is what the Federal Reserve is calling the moment it begins winding down the large-scale asset purchases it's been using to keep interest rates low.
But the Fed hasn't said when this will occur.
So in a note today, Morgan Stanley's Matthew Hornbach lays out seven different scenarios modeling changes to treasury yields for when the taper does start.
Here's the table:
And Hornbach's comment:
Exhibit 4 shows our estimated impact on 5-, 10-, and 30-year Treasury yields under various tapering scenarios. The final column shows the ‘fair value’ level for 10-year Treasury yields under each of these tapering assumptions. For instance, if the Fed begins to taper purchases in July, we believe 10-year Treasury yields should lie between 2.25-2.30%.
Hornbach says he's betting on the December start date, with September the earliest conceivable date.
"As a result, we believe 10-year Treasury yields above 2.15% are a buying opportunity," he says.
The 10-year is right around 2.12% today.
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